The hottest, most debated question in securities regulation at present is whether (or to what extent) the SEC can escape the reach of the U.S. Supreme Court’s decision in West Virginia v. EPA, 142 S. Ct. 2587 (2022). Decided on the last day of the Court’s term, that decision interpreted the “Major Question Doctrine” (or MQD) to bar the EPA from adopting regulations that “effected a fundamental revision of the statute.” Does the MQD apply as well to the SEC and its attempt to require greatly enhanced climate-related disclosures? This column will suggest that the SEC can outflank that doctrine, but only if it is careful.

The MQD can be analyzed on several levels. On the level of statutory construction, the case for the SEC is much stronger than it was for the EPA in West Virginia. The EPA was relying on a single opaque phrase—“best system of emission reduction” (or BSER), which is set forth in §111(d) of the Clean Air Act and had not been previously interpreted to give the EPA the authority it now claimed. As Justice Scalia said 20 years earlier, Congress “does not … hide elephants in mouseholes.” See Whitman v. American Trucking Ass’n, 531 U.S. 457, 468 (2001). It was but a small step from that position to the Court saying in West Virginia v. EPA:

“Nor does Congress typically use oblique or elliptical language to empower an agency to make a ‘radical or fundamental change’ to a statutory scheme.”